The Mexican peso has strengthened beyond the 17.8 level, supported by a broader pullback in the US dollar following a Pakistan-brokered proposal for a 45-day ceasefire in the Middle East. This development has improved risk sentiment, as investors anticipate a potential truce and the reopening of the Strait of Hormuz, which would reduce the risk of a systemic energy price shock. Elevated domestic interest rates also continue to underpin the peso, with Banxico expected to maintain a restrictive policy stance. According to the latest Banxico survey, inflation is projected to end 2026 above target, at around 4%. The recent appreciation in the currency came on the heels of a dovish turn by Banco de México, which resumed its easing cycle with a 25 basis point cut to 6.75% in a split decision. The central bank also signaled the possibility of one further cut, amid mounting concerns over slowing economic activity and expectations of a widening interest rate differential. Market attention now shifts to President Trump’s impending Tuesday deadline regarding potential strikes on Iranian infrastructure.